6 Reasons Trump’s Infrastructure Plan Falls Short

Trump’s “$1 Trillion” Infrastructure Plan

President Trump has promised a $1 trillion infrastructure plan. On the surface, this appears to be the largest federal investment in infrastructure in history. But is it really? Would cities and states really get $1 trillion for transportation projects? Will we finally build the seamless, reliable transportation network that people demand?

Looking more closely at the details, it’s clear Trump’s plan is actually a huge step backwards, providing significantly fewer dollars to transportation than today. Here are six reasons why:

1. Trump’s plan isn’t $1 trillion in real dollars. It’s $200 billion.

Trump’s plan allocates $200 billion in real federal dollars toward infrastructure over ten years, with most of the spending front-loaded in the first three years. The remaining $800 billion would be financed through a mix of tax credits and public-private partnerships (more on that later).

And while $200 billion over ten years seems like a significant investment, it’s actually less than the current federal investment in transportation. The FAST Act of 2015 currently disburses $305 billion over six years, or $51 billion per year.

2. It’s unclear how many of the real dollars will go toward transit.

In Trump’s budget proposal, public transit is not on the official list of sectors considered infrastructure. Specifically, the plan defines infrastructure as “surface transportation, airports, waterways, ports, drinking and waste water, broadband, and key Federal facilities.” This means public transportation would compete against funding for water systems, energy, and broadband projects — even schools and veteran hospitals.

Adding to the uncertainty, if passed, Trump’s 2018 budget proposal would cut $2.4 billion from transit including eliminating TIGER and the Capital Investment Grants that funds transit capital projects.

There are also signs that Congress wants to divest transit from the Highway Trust Fund, the primary source of federal funds for transportation. Since 2012, the Republican platform has proposed eliminating transit from the Highway Trust Fund: “One-fifth of its funds are spent on mass transit, an inherently local affair that serves only a small portion of the population, concentrated in six big cities.”

3. Public-Private Partnerships (P3s) are loans, not grants.

The lion’s share of Trump’s $1 trillion — $800 billion — is financed through P3s. A P3 is not a direct grant to build a project; rather, it’s a loan from a private entity that must be repaid with interest. P3s are best suited for complex projects of national or regional significance that have user fees to repay the private investor. Examples are toll roads in dense urban areas. But in the past, even toll roads financed as P3s have required state and federal grants. It’s difficult for tolls alone to generate enough revenue to pay for the construction and operations of the road.

The same goes for transit. To fully fund the cost of bus or rail lines, fares would have to be set too high for consumer demand or for low-income workers to afford. The only new construction transit project in the U.S. to be financed and built as a P3, Denver’s EagleP3, still had to receive over $1.3 billion in federal, state, and local grants, including a $1-billion federal New Starts grant.

4. “Asset recycling” needs some serious vetting.

The Trump Administration is also floating the idea of asset recycling, or leasing a public asset in return for an upfront payment that can be used to pay for other projects. This idea needs serious vetting.

For example, when Chicago leased its parking meters, it didn’t consider how the city might use the road differently in the future. Now dedicating a lane to Bus Rapid Transit, or shutting down a street for a neighborhood festival, or even simply re-paving a road means the city is taking its parking meters out of service and owes money to the private operator.

Any government considering leasing an asset needs to have the time, skills, and experience on hand to negotiate a contract that anticipates how leasing the asset affects future use and whether the deal benefits taxpayers — similar to the Midway Advisory Panel that evaluated the lease of Midway Airport.

5. Congress isn’t sold on the cuts needed to get to $200 billion.

It is Congress, not the Trump administration, that must approve any infrastructure package. Funding the $200 billion plan is reliant on cutting government programs and service that will be difficult to get through Congress. These cuts would include rolling back federal disability services, children’s health care, student loans, retirement benefits, and farm subsidies. These are unlikely to have enough support from Congress, effectively killing the proposal.

Similarly, Congress isn’t sold on P3s. Republicans from rural areas know P3s are an unrealistic option to build transportation projects in their districts. The Senate Environment and Public Works Committee chair John Barrasso (R-WY.), said, “Funding solutions that involve public-private partnerships, as have been discussed by [Trump] administration officials, may be innovative solutions for crumbling inner cities, but do not work for rural areas.”

Democrats want an infrastructure bill, and they are supportive of P3s, but only as part of an overall solution — combined with an increase in real dollars for projects. Representative Peter DeFazio (D-OR.), the ranking Democratic member of the House Transportation and Infrastructure Committee said he wants to see, “…a real bill that has real federal investment and does real work.” House Minority Leader Nancy Pelosi (D-CA) said, “If it’s an infrastructure bill disguised as a tax bill, it’s not going to go.”

Last week Secretary Chao testified that Trump’s infrastructure package will contain a funding instrument for rural infrastructure but did not elaborate on how the mechanism would work.

6. Funding is the real problem.

Pretty much everyone — Trump, Congress, state and local officials, the public — wants to invest in transportation. The problem is that no one can agree on funding. The Highway Trust Fund, the federal account that bankrolls most transportation projects, has been bankrupt for nearly a decade. It collects its money from an 18.4 cent-per-gallon gasoline tax passed in 1993. 24 years of inflation have diluted much of its purchasing power. Advances in fuel efficiency will only further chip away at gas tax revenues in the future.

With a Republican Congress that’s averse to tax hikes, we’re unlikely to see an increase in the federal motor fuel tax anytime soon. The Highway Trust Fund will likely stay insolvent.

The Bottom Line

Don’t expect Trump’s infrastructure to be a panacea for transit. Our recommendation? Don’t wait on Washington.

Want to learn more about Trump’s plans for transportation? Read The Reality of Trump’s Transit Budget Proposal and What a Government Shutdown Would Mean for Transit Planning.